See accompanying notes to unaudited condensed
financial statements.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
Note
1. Organization and Significant Accounting Policies
Organization
and Business Operations
VirTra,
Inc. (the “Company,” “VirTra,” “we,” “us” or “our”), located in Chandler,
Arizona, is a global provider of judgmental use of force training simulators, firearms training simulators and driving simulators for
the law enforcement, military, educational and commercial markets. The Company’s patented technologies, software, and scenarios
provide intense training for de-escalation, judgmental use-of-force, marksmanship and related training that mimics real-world situations.
VirTra’s mission is to save and improve lives worldwide through practical and highly effective virtual reality and simulator technology.
The Company sells its products worldwide through a direct sales force and international distribution partners. The original business
started in 1993 as Ferris Productions, Inc. In September 2001, Ferris Productions, Inc. merged with GameCom, Inc. to ultimately become
VirTra, Inc., a Nevada corporation.
The
Russian-Ukraine conflict is a global concern. The Company does not have any significant direct exposure to Russia or Ukraine through
its operations, employee base, investments, or sanctions. We have no basis to evaluate the possible risks of this conflict.
Basis
of Presentation
The
unaudited financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended
December 31, 2022 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the
SEC on March 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as
permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.
The
accompanying unaudited financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our
financial position on March 31, 2023, and the results of our operations and cash flows for the periods presented. We derived the December
31, 2022, balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP.
Interim
results are subject to seasonal variations, and the results of operations for the three months ended March 31, 2023, are not necessarily
indicative of the results to be expected for the full year.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Significant
accounting estimates in these financial statements include valuation assumptions for share-based payments, allowance for doubtful accounts,
inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets and intangible assets, income tax valuation
allowances, and the allocation of the transaction price to the performance obligations in our contracts with customers.
Revenue
Recognition
The
Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)
606, Revenue from Contracts with Customer (Topic 606) (“ASC 606”) on January 1, 2018, and the Company elected to use the
modified retrospective transition method which requires application of ASC 606 to uncompleted contracts at the date of adoption. The
adoption of ASC 606 did not have a material impact on the financial statements.
Under
ASC 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the
transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as)
the Company satisfies a performance obligation. Significant judgment is necessary when making these determinations.
The
Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable
software and the sale of extended service-type warranties. The Company’s policy is to typically invoice upon completion of installation
and/or training until such a time the performance obligations that have been satisfied are included in unbilled. Sales discounts are
presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets (accounts
receivable and unbilled revenue). Prepaid deposits received at the time of sale and extended warranties purchased are recorded as current
and long-term liabilities (deferred revenue) until earned. The following briefly summarizes the nature of our performance obligations
and method of revenue recognition:
Performance
Obligation |
|
Method
of Recognition |
|
|
|
Simulator
and accessories |
|
Upon
transfer of control |
|
|
|
Installation
and training |
|
Upon
completion or over the period of services being rendered |
|
|
|
Extended
service-type warranty |
|
Deferred
and recognized over the life of the extended warranty |
|
|
|
Customized
software and content |
|
Upon
transfer of control or over the period services are performed depending on the terms of the contract |
|
|
|
Customized
content scenario |
|
As
performance obligation is transferred over time (input method using time and materials expanded) |
|
|
|
Sales-based
royalty exchanged for license of intellectual property |
|
Recognized
as the performance obligation is satisfied over time – which is as the sales occur. |
The
Company recognizes revenue upon transfer of control or upon completion of the services for the simulator and accessories; for the installation
and training and customized software performance obligations as the customer has the right and ability to direct the use of these products
and services and the customer obtains substantially all of the remaining benefit from these products and services at that time. Revenue
from certain customized content contracts may be recognized over the period the services are performed based on the terms of the contract.
For the sales-based royalty exchanged for license of intellectual property, the Company recognized revenue as the sales occur over time.
The
Company recognizes revenue on a straight-line basis over the period of services being rendered for the extended service-type warranties
as these warranties represent a performance obligation to “stand ready to perform” over the duration of the warranties. As
such, the warranty service is performed continuously over the warranty period.
Each
contract states the transaction price. The contracts do not include variable consideration, significant financing components or noncash
consideration. The Company has elected to exclude sales and similar taxes from the measurement of the transaction price. The contract’s
transaction price is allocated to the performance obligations based upon their stand-alone selling prices. Discounts on the stand-alone
selling prices, if any, are allocated proportionately to each performance obligation.
Disaggregation
of Revenue
Under
ASC 606, disaggregated revenue from contracts with customers depicts the nature, amount, timing, and uncertainty of revenue and cash
flows affected by economic factors. The Company has evaluated revenues recognized and the following table illustrates the disaggregation
disclosure by customer’s location and performance obligation.
Schedule of Disaggregation of Revenue
| |
Commercial | | |
Government | | |
International | | |
Total | | |
Commercial | | |
Government | | |
International | | |
Total | |
| |
Three Months Ended March 31 | |
| |
2023 | | |
2022 | |
| |
Commercial | | |
Government | | |
International | | |
Total | | |
Commercial | | |
Government | | |
International | | |
Total | |
Simulators and accessories | |
$ | 489,810 | | |
$ | 5,479,641 | | |
$ | 3,141,870 | | |
$ | 9,111,321 | | |
$ | 1,580,192 | | |
$ | 3,224,558 | | |
$ | 906,636 | | |
$ | 5,711,386 | |
Extended Service-type warranties | |
| 23,343 | | |
| 539,208 | | |
| 19,424 | | |
| 581,975 | | |
| 31,487 | | |
| 620,361 | | |
| 17,662 | | |
| 669,510 | |
Customized software and content | |
| 19,500 | | |
| 7,196 | | |
| (16,861 | ) | |
| 9,835 | | |
| - | | |
| 51,714 | | |
| 83,000 | | |
| 134,714 | |
Installation and training | |
| 20,562 | | |
| 249,554 | | |
| 53,688 | | |
| 323,804 | | |
| 11,865 | | |
| 157,553 | | |
| 68,200 | | |
| 237,618 | |
Total Revenue | |
$ | 553,215 | | |
$ | 6,275,599 | | |
$ | 3,198,121 | | |
$ | 10,026,935 | | |
$ | 1,623,544 | | |
$ | 4,054,186 | | |
$ | 1,075,498 | | |
$ | 6,753,228 | |
For
the three months ended March 31, 2023, governmental customers comprised $6,275,599, or 63% of total net sales, commercial customers comprised
$553,215, or 5% of total net sales, and international customers comprised $3,198,121, or 32% of total net sales. By comparison, for the
three months ended March 31, 2022, governmental customers comprised $4,054,186, or 60%, of total net sales, commercial customers comprised
$1,623,544, or 24%, of total net sales, and international customers comprised $1,075,498, or 16%, of total net sales.
Customer
Deposits
Customer
deposits consist of prepaid deposits received for equipment purchase orders and for Subscription Training Equipment Partnership (“STEP”)
operating agreements that expire annually. Customer deposits are considered a deferred liability until the completion of the customer’s
contract performance obligation. When revenue is recognized, the deposit is applied to the customer’s receivable balance. Customer
deposits are recorded as a current liability under deferred revenue on the accompanying balance sheet and totaled $2,409,433 and $2,719,108
on March 31, 2023, and December 31, 2022, respectively. Changes in deferred revenue amounts related to customer deposits will fluctuate
from year to year based upon the mix of customers required to prepay deposits under the Company’s credit policy.
Warranty
The
Company warranties its products from manufacturing defects on a limited basis for a period of one year after purchase, but also sells
separately priced extended service-type warranties for periods of up to four years after the expiration of the standard one-year warranty.
During the term of the initial one-year warranty, if the device fails to operate properly from defects in materials and workmanship,
the Company will fix or replace the defective product. Deferred revenue for separately priced extended warranties one year or less totaled
$1,393,865 and $1,583,384 as of March 31, 2023, and December 31, 2022, respectively. Deferred revenue for separately priced extended
warranties longer than one year totaled $2,220,316 and $1,601,472 as of March 31, 2023, and December 31, 2022, respectively. The accrual
for the one-year manufacturer’s warranty liability totaled $358,000 and $358,000 as of March 31, 2023, and December 31, 2022, respectively,
as there were no major warranty expenses that justified a change in accrual. During the three months ended March 31, 2023, and 2022,
the Company recognized revenue of $581,975 and $669,510, respectively, related to the extended service-type warranties that was amortized
from the deferred revenue balance at the beginning of each period. Changes in deferred revenue amounts related to extended service-type
warranties will fluctuate from year to year based upon the average remaining life of the warranties at the beginning of the period and
new extended service-type warranties sold during the period.
Concentration
of Credit Risk and Major Customers and Suppliers
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, certificates
of deposit, and accounts receivable.
The
Company’s cash, cash equivalents and certificates of deposit are maintained with financial institutions with high credit standings
and are FDIC insured deposits. The FDIC insures deposits according to the ownership category in which the funds are insured and how the
accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.
The Company had uninsured cash and cash equivalents of $13,757,735 and $12,983,597 as of March 31, 2023, and December 31, 2022, respectively.
Sales
are typically made on credit and the Company generally does not require collateral. Management performs ongoing credit evaluations of
its customers’ financial condition and maintains an allowance for estimated losses. Historically, the Company has experienced minimal
charges relative to doubtful accounts.
Historically,
the Company primarily sells its products to U.S. federal and state agencies.
As
of March 31, 2023, the Company had one customer that accounted for 26% of the total accounts receivable.
Net
Income per Common Share
The
net income per common share is computed by dividing net income by the weighted average of common shares outstanding. Diluted net income
per share reflects the potential dilution, using the treasury stock method, that would occur if outstanding stock options and warrants
were exercised. Earnings per share computations are as follows:
Schedule
of Earnings Per Share
| |
2023 | | |
2022 | |
| |
Three Months Ended March 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Net Income (loss) | |
$ | 2,946,373 | | |
$ | 577,074 | |
Weighted average common stock outstanding | |
| 10,917,311 | | |
| 10,807,269 | |
Incremental shares from stock options | |
| 2,080 | | |
| 43,107 | |
Weighted average common stock outstanding, diluted | |
| 10,919,391 | | |
| 10,850,376 | |
| |
| | | |
| | |
Net income (loss) per common share and common equivalent share | |
| | | |
| | |
Basic | |
$ | 0.27 | | |
$ | 0.05 | |
Diluted | |
$ | 0.27 | | |
$ | 0.05 | |
Note
2. Inventory
Inventory
consisted of the following as of:
Schedule of Inventory
| |
March 31, 2023 | | |
12/31/2022 | |
| |
| | |
| |
Raw materials and work in process | |
$ | 11,050,225 | | |
$ | 9,894,759 | |
Reserve | |
| (302,431 | ) | |
| (302,431 | ) |
| |
| | | |
| | |
Total Inventory | |
$ | 10,747,794 | | |
$ | 9,592,328 | |
Note
3. Property and Equipment
Property
and equipment consisted of the following as of:
Schedule of Property and Equipment
| |
March 31, 2023 | | |
December 31, 2022 | |
Land | |
$ | 1,778,987 | | |
$ | 1,778,987 | |
Building & Building Improvements | |
| 9,129,364 | | |
| 9,129,364 | |
Computer equipment | |
| 1,209,371 | | |
| 1,210,021 | |
Furniture and office equipment | |
| 302,173 | | |
| 289,379 | |
Machinery and equipment | |
| 2,787,932 | | |
| 2,788,803 | |
STEP equipment | |
| 2,002,083 | | |
| 1,954,430 | |
Leasehold improvements | |
| 347,384 | | |
| 347,384 | |
Construction in Progress | |
| 1,853,847 | | |
| 1,749,332 | |
| |
| | | |
| | |
Total property and equipment | |
| 19,411,141 | | |
| 19,247,700 | |
Less: Accumulated depreciation and amortization | |
| (4,202,265 | ) | |
| (3,980,567 | ) |
| |
| | | |
| | |
Property and equipment, net | |
$ | 15,208,876 | | |
$ | 15,267,133 | |
Depreciation
expenses, including STEP depreciation, were $223,781 and $195,031 for the three months ended March 31, 2023, and 2022, respectively.
Note
4. Intangible Assets
Intangible
assets consisted of the following as of:
Schedule of Intangible Asset
| |
March 31, 2023 | | |
December 31, 2022 | |
Patents | |
$ | 160,000 | | |
$ | 160,000 | |
Capitalized media content | |
| 451,244 | | |
| 451,244 | |
Acquired lease intangible assets | |
| 83,963 | | |
| 83,963 | |
| |
| | | |
| | |
Total intangible assets | |
| 695,207 | | |
| 695,207 | |
Less accumulated amortization | |
| (113,056 | ) | |
| (107,430 | ) |
| |
| | | |
| | |
Intangible assets, net | |
$ | 582,151 | | |
$ | 587,777 | |
Amortization expense was
$5,626 and $20,564
for the three months ended March 31, 2023, and 2022, respectively.
Note
5. Leases
The
Company leases approximately 37,729 rentable square feet of office and warehouse space from an unaffiliated third party for our former
corporate office, manufacturing, assembly, warehouse and shipping facility located at 7970 South Kyrene Road, Tempe, Arizona 85284. From
2016 through March 2019, the Company leased approximately 4,529 rentable square feet of office and industrial space from an unaffiliated
third party for our machine shop at 2169 East 5th Street, Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from
the 5th Street location to 7910 South Kyrene Road, located within the same business complex as our main office. The Company executed a
lease amendment to add an additional 5,131 rentable square feet for the machine shop and extended its existing office lease through April
2024. On June 1, 2022, we entered into a new lease of approximately 9,350 square feet located at 12301 Challenger Parkway, Orlando, Florida,
from an unaffiliate third party through May 2027.
On
March 1,2023 the company entered into a sublease for its 7970 South Kyrene location for the last 13 months of the lease agreement.
The
Company’s lease agreements do not contain any residual value guarantees, restrictive covenants or variable lease payments. The
Company has not entered into any financing leases.
In
addition to base rent, the Company’s lease generally provides for additional payments for other charges, such as rental tax. The
lease includes fixed rent escalations. The Company’s lease does not include an option to renew.
The
Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net,
operating lease liability – short-term, and operating lease liability – long-term on its balance sheets.
Operating
lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation
to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on
the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company
uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease
payments. The incremental borrowing rate used at adoption was 4.5%. Significant judgement is required when determining the Company’s
incremental borrowing rate. The Company uses the implicit rate when readily determinable. Lease expense for lease payments is recognized
on a straight-line basis over the lease term.
Effective
June 1, 2022, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $840,855. Effective
January 1, 2019, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $1,721,380
and derecognized $46,523 deferred rent for an adjusted operating lease right-of-use asset in the net amount of $1,674,857.
Schedule of Balance Sheet Classification of Lease Assets and Liabilities
Balance Sheet Classification | |
March
31, 2023 | | |
December 31, 2022 | |
Assets | |
| | | |
| | |
Operating lease right-of-use assets, beginning of period | |
$ | 1,212,814 | | |
$ | 784,306 | |
Additional property in Orlando | |
| - | | |
| 840,843 | |
Amortization for the period ended | |
| (121,774 | ) | |
| (412,335 | ) |
Total operating lease right-of-use asset | |
$ | 1,091,040 | | |
$ | 1,212,814 | |
Liabilities | |
| | | |
| | |
Current | |
| | | |
| | |
Operating lease liability, short-term | |
$ | 565,949 | | |
$ | 557,683 | |
Non-current | |
| | | |
| | |
Operating lease liability, long-term | |
| 585,165 | | |
| 720,023 | |
Total lease liabilities | |
$ | 1,151,114 | | |
$ | 1,277,706 | |
Future
minimum lease payments as of March 31, 2023, under non-cancelable operating leases are as follows:
Schedule
of Future Minimum Lease Payments
| |
| | |
2023 | |
$ | 464,563 | |
2024 | |
| 317,938 | |
2025 | |
| 191,478 | |
2026 | |
| 196,311 | |
2027 | |
| 99,381 | |
| |
| | |
Total lease payments | |
| 1,269,671 | |
Less: imputed interest | |
| (118,557 | ) |
Operating lease liability | |
$ | 1,151,114 | |
Rent
expenses for the three months ended March 31, 2023, and 2022 were $108,230 and $81,651, respectively.
Note
6. Accrued Expenses
Accrued
compensation and related costs consisted of the following as of:
Schedule
of Accrued Compensation and Related Costs
| |
March 31, 2023 | | |
December 31, 2022 | |
Salaries and wages payable | |
$ | 210,102 | | |
$ | 502,940 | |
Employee benefits payable | |
| 15,851 | | |
| 31,618 | |
Accrued paid time off (PTO) | |
| 588,913 | | |
| 590,491 | |
Profit sharing payable | |
| 519,841 | | |
| 369,841 | |
| |
| | | |
| | |
Total accrued compensation and related costs | |
$ | 1,334,707 | | |
$ | 1,494,890 | |
Accrued
expenses and other current liabilities consisted of the following as of:
Schedule
of Accrued Expenses and Other Current Liabilities
| |
March 31, 2023 | | |
December 31, 2022 | |
Manufacturer’s warranties | |
$ | 358,000 | | |
$ | 358,000 | |
Taxes payable | |
| 2,757,370 | | |
| 1,294,110 | |
Miscellaneous payable | |
| 259,347 | | |
| 265,812 | |
| |
| | | |
| | |
Total accrued expenses and other current liabilities | |
$ | 3,374,717 | | |
$ | 1,917,922 | |
Note
7. Note Payable
On
August 25, 2021, the Company completed the purchase of real property located in Chandler, Arizona (the “Property”) for $10,800,000,
paid with cash and proceeds from a mortgage loan from Arizona Bank & Trust in the amount of $8,600,000. The loan terms include interest
to be accrued at a fixed rate of 3% per year, 119 regular monthly payments of $40,978, and one irregular payment of $5,956,538 due on
the maturity date of August 23, 2031. The Company began making monthly payments on September 23, 2021. The payment and performance of
the loan is secured by a security interest in the property acquired.
The
note payable amounts consist of the following:
Schedule
of Notes Payable
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
| | |
| |
Short-term liabilities | |
| | | |
| | |
Note payable, principal | |
$ | 224,144 | | |
$ | 227,324 | |
Accrued interest to date | |
| 5,254 | | |
| 5,213 | |
| |
| | | |
| | |
Note Payable, short-term | |
$ | 229,398 | | |
$ | 232,537 | |
| |
| | | |
| | |
Long-term liabilities | |
| | | |
| | |
Note payable, principal | |
$ | 7,992,612 | | |
$ | 8,050,116 | |
| |
| | | |
| | |
Note payable, long tern | |
$ | 7,992,612 | | |
$ | 8,050,116 | |
Note
8. Related Party Transactions
During
the three months ended March 31, 2023, one Board member and the Company’s Co-CEO purchased 7,500 shares of common stock, $0.0001
par value per share (the “Common Stock”), pursuant to the exercise of previously awarded stock options at the exercise price
of $2.23 per share, for a total of $16,726.
During
the three months ended March 31, 2022, the Company redeemed 8,750 previously awarded stock options nearing expiration from the Company’s
Co-CEO and former COO. The redemption eliminated the stock options and resulted in a total of $24,150 in additional compensation expense
in 2022. Also, during the three months ended March 31, 2022, the Company issued 2,500 Common Stock to one member of the Board of Directors
for previously awarded stock options at an exercise price of $7,975.
Note
9. Commitments and Contingencies
Litigation
From
time to time, the Company is notified of litigation or that a claim is being made against it. The Company evaluates contingencies on
an on-going basis and has established loss provisions for matters in which losses are probable and the amount of loss can be reasonably
estimated. There is no pending litigation at this time.
Restricted
Stock Unit Grants
On
August 26, 2021, and April 11, 2022, the Compensation Committee of the Board of Directors issued a total of 392,223, and 288,889 Restricted
Stock Units (RSUs), respectively, pursuant to Section 9 of the 2017 Equity Incentive Plan to the co-Chief Executive Officers and the
Chief Operating Officer, to be awarded based on achievement of certain performance goals over the next three years. During August 2022,
168,090 Restricted Stock Units were forfeited upon the departure of the Chief Operating Officer.
On
December 1, 2022, the Company issued a total of 15,000 RSUs to its Chief Financial Officer, which can be awarded based on achievement
of performance goals over the next three years. On January 1, 2023, the Company issued 42,735 RSUs to a new member of the Board of Directors
which can be awarded only upon a sale of the Company.
It
is the Company’s policy to estimate the fair value of the RSU’s on the date of the grant and evaluate the probability of
achieving the net profit (net income under GAAP) tranches quarterly. If the target is deemed probable, the expense is amortized on a
straight-line basis over the remaining period. The Company determined based on the vesting terms described above that the net profit
(net income under GAAP) for the twelve months ending June 30, 2022, was $2,720,015 and therefore awarded 5,747 (prior to deduction of
1,840 shares to pay the tax withholding liability) and 7,407 shares of common stock to its Co-Chief Executive Officers. The Company determined
based on the vesting terms described above that the net profit (net income under GAAP) for the twelve months ending June 30, 2023, of
$3,000,000 is probable and recorded expenses of $24,063 and $26,250 related to the RSUs for the three months ending March 31, 2023, and
2022, respectively.
Profit
Sharing
VirTra
provides a discretionary profit-sharing program that pays out a percentage of Company profits each year as a cash bonus to eligible employees.
The cash payment is typically split into two equal payments and distributed pro-rata in April and October of the following year to only
active employees. For the three months ended March 31, 2023, and 2022, $150,000 and $75,000 was expensed to operations for profit sharing.
Note
10. Stockholders’ Equity
Stock
Repurchase
On
October 25, 2016, the Company’s Board of Directors authorized the repurchase of up to $1 million of its common stock under Rule
10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Purchases made pursuant to this authorization will be made
in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule
10b-18. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject
to economic and market conditions, stock price, applicable legal requirements and other factors. On January 9, 2019, VirTra’s Board
of Directors authorized an additional $1 million be allocated for the repurchase of VirTra’s stock under the existing 10b-18 plan.
The stock repurchase program was suspended as a result of interim rulings for public-company recipients of a PPP loan under the CARES
Act. Although the Company’s PPP loan was forgiven on July 20, 2021, the suspension of the stock repurchase program continues to
remain in effect.
Non-qualified
Stock Options
The
Company has periodically issued non-qualified stock options to key employees, officers and directors under a stock option compensation
plan approved by the Board of Directors in 2009. Terms of option grants are at the discretion of the Board of Directors and are generally
seven years. Upon the exercise of these options, the Company expects to issue new authorized shares of its common stock. The following
table summarizes all non-qualified stock options as of:
Schedule of Non-qualified Stock Options
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
Number of Stock | | |
Weighted Exercise | | |
Number of Stock | | |
Weighted Exercise | |
| |
Options | | |
Price | | |
Options | | |
Price | |
Options outstanding, beginning of year | |
| 45,000 | | |
$ | 4.26 | | |
| 112,500 | | |
$ | 3.51 | |
Granted | |
| - | | |
| - | | |
| - | | |
| - | |
Redeemed | |
| - | | |
| - | | |
| (27,500 | ) | |
| 2.44 | |
Exercised | |
| (7,500 | ) | |
| 2.23 | | |
| (17,500 | ) | |
| 2.33 | |
Expired / terminated | |
| - | | |
| - | | |
| (22,500 | ) | |
| 4.05 | |
Options outstanding, end of period | |
| 37,500 | | |
$ | 4.60 | | |
| 45,000 | | |
$ | 4.26 | |
Options exercisable, end of period | |
| 37,500 | | |
$ | 4.60 | | |
| 45,000 | | |
$ | 4.26 | |
The
Company did not have any non-vested stock options outstanding as of March 31, 2023, and December 31, 2022. The weighted average contractual
term for options outstanding and exercisable on March 31, 2023, and 2022 was 7 years. The aggregate intrinsic value of the options outstanding
and exercisable on March 31, 2023, and 2022 was $1,800 and $258,077, respectively. For the three months ended March 31, 2023, and 2022,
the Company received payments related to the exercise of options in the amount of $16,726 and $7,975, respectively. The aggregate intrinsic
value is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s
common stock for those stock options that have an exercise price lower than the fair value of the Company’s common stock. Options
with an exercise price above the fair value of the Company’s common stock are considered to have no intrinsic value.
2017
Equity Incentive Plan
Through
March 31, 2023, 224,133 and 288,889 restricted stock awards and 14,057 and 10,543 restricted shares have been granted under the Equity
Plan to the Company’s Co-CEO’s and former COO, respectively.
Common
stock activity
During
the three months ended March 31, 2023, one Board member and the Company’s Co-CEO purchased 7,500 shares of common stock, $0.0001
par value per share (the “Common Stock”), pursuant to the exercise of previously awarded stock options at the exercise price
of $2.23 per share, for a total of $16,726.
Also,
during the three months ended March 31, 2023, 5,331 shares valued at $25,000 and 10,684 shares valued at $50,000 were issued to an employee
and a Board member, respectively, as signing bonuses. The shares will vest if the Board member remains in continuous service through
June 30, 2024.
Note
11. Subsequent Events
None.